Winland Reports Q2 2011 Earnings and Revenue

Winland Electronics, Inc. (NYSE Amex: WEX) today reported sales of Proprietary Environmental Monitoring products of $984,000 for the second quarter ended June 30, 2011, up $233,000, or 31.0 percent, from the $751,000 that the company reported in the comparable period in 2010. Net loss from the quarter totaled $140,000, or $0.04 per share, an improvement over a loss of $822,000 in the second quarter of 2010. The loss for the current quarter was attributable primarily to lower gross margins.

The company reported an operating loss of $250,000 for the three months ended June 30, 2011 compared to an operating loss of $475,000 for the comparable period in 2010. Gross margins decreased from 38.2 percent to 33.7 percent for the three months ended June 30, 2011 compared to the same period in 2010. As has been the case in previous quarters, the declines in gross margin were expected based on the agreed upon price structure that is part of Winland’s manufacturing agreement with Nortech Systems, Incorporated.

"The positive sales trends we have been experiencing continued into our second quarter,” said Brian Lawrence, Winland’s Chief Financial Officer and Senior Vice President. "Sales were up seven percent on a sequential quarterly basis, the result of a large project sale to a new customer, and continued strong sales from our existing customers. We continue to gain traction in our markets as both new and existing customers recognize the value of our critical condition monitoring solutions.”

During the second quarter Winland recognized additional sales of EMS related inventories to Nortech. These sales provided additional cash flow and a net gain on the sale of the EMS business.

The company continued to benefit from the lower cost structure realized by its restructuring in late 2010 and early 2011. General and Administrative expenses totaled $295,000 for the second quarter, down $215,000 year-over-year. Sales and marketing expenses were $240,000 for the three months ended June 30, 2011, down slightly from the second quarter of 2010. The decrease was due to reduced product support costs of $10,000, reduced advertising expenses of $7,000 offset by increased salaries and benefits expenses of $16,000.

Winland Introduces EnviroAlert EA800-ip

In mid-July, the company announced the introduction of its EnviroAlert EA800-ip. The EA800-ip adds Ethernet connectivity to Winland’s EA800 product, allowing remote monitoring and modification of sensor settings.

"We believe the EA800-ip will add value to our current customer base and provide opportunities in vertical markets outside the security channel,” Mr. Lawrence said. Winland plans to debut the product in mid-September at the ASIS International Show in Orlando, Florida.

Six-Month Results

Net sales for the six months ended June 30, 2011 were $1.9 million, up $323,000 from the comparable period in 2010. The increase was related to increased sales of $216,000 to our largest distributor, a large project sale of $72,000 to a new customer and increased sales to numerous smaller distributors.

The company reported a net loss of $346,000, or $0.09 per basic and diluted share for the six months ended June 30, 2011, versus a net loss of $1.4 million, or $0.37 per basic and diluted share for the same period in 2010.

For the six months ended June 30, 2011, the company reported an operating loss of $411,000 compared to an operating loss of $852,000 for the same period in 2010. Gross margins decreased to 31.7 percent from 39.7 percent for the six months ended June 30, 2011 compared to the same period in 2010.

General and Administrative expenses were $502,000 in the first half of 2011, down from $970,000 from the same period in 2010. The decline in expense was primarily related to decreased salaries expenses of $247,000, decreased audit fees of $70,000, decreased financial advisor consulting fees of $66,000 and decreased professional fees of $61,000 offset by $47,000 of increased bank fees related to non-recurring financing fees.

For the six months ended June 30, 2011, sales and marketing expenses were $466,000 down $44,000 compared to the same period in 2010. The decrease was due to reduced product support costs of $23,000 and reduced advertising expenses of $16,000.

"While we are encouraged by the increased sales in our proprietary product line, we remain focused on the need to return to profitability,” Mr. Lawrence said. "That said, we believe that the investments we’ve been making in sales and the research and development of our expanding product line are helping us gain the needed traction in the marketplace which we anticipate will result in future profitability.”

About Winland Electronics

Winland Electronics, Inc. (www.winland.com), is an industry leader of critical condition monitoring devices. Products including EnviroAlert, WaterBug, TempAlert, Vehicle Alert and more are designed in-house to monitor critical conditions for industries including health/medical, grocery/food service, commercial/industrial, as well as agriculture and residential. Proudly made in the USA, Winland products are compatible with any hard wire or wireless alarm system and are available through distribution worldwide. Headquartered in Mankato, MN, Winland trades on the NYSE Amex Exchange under the symbol WEX.

Cautionary Statements

Certain statements contained in this press release and other written and oral statements made from time to time by the company do not relate strictly to historical or current facts. As such, they are considered forward-looking statements, which provide current expectations or forecasts of future events. The statements included in this release with respect to the following matters are forward looking statements; (i) that the company continues to gain traction in markets as both new and existing customers recognize the value of its critical condition monitoring solutions (ii) that the company’s EA800-ip will add value to its current customer base, (iii) that the company’s EA800-ip will provide opportunities in vertical markets outside the security channel and (iv) that the investments in sales and the research and development of our expanding product line will help gain the needed traction in the marketplace and result in future profitability. These statements involve a variety of risks and uncertainties, known and unknown, including among other risks that (i) the company’s customers recognize the value of its critical condition monitoring solutions, (ii) the company’s customers will find value in the EA800-ip, (iii) the EA800-ip will provide opportunities in vertical markets outside the security channel and (iv) that investments in sales and research and development of its expanding product line will gain the needed traction and result in future profitability. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.